Tight deadline for Gateway review as political headwinds grow

Protesters march through the streets of Kitimat, B.C., June 24, 2012. About 250 people rallied against the Northern Gateway Pipeline project, which would carry oil sands bitumen from Alberta to Kitimat for shipment to Asia.

The federal government has imposed a strict deadline on a review panel to conclude the work on Enbridge Inc.'s controversial Northern Gateway pipeline, even as it scrambles to rescue the $6-billion project from a political sinkhole.

In a notice released Friday, Ottawa has given a review panel until December 2013 to conclude its report, and cabinet will make the final decision by June 2014, roughly a year before Prime Minister Stephen Harper is due to face B.C. voters. A majority in the province, at this point, at least, are staunchly opposed to the Gateway project. The notice confirmed that the federal cabinet – not the National Energy Board – will have the final say as to whether the pipeline can proceed despite environmental concerns.

But the Conservative's senior minister for British Columbia has fired a clear warning shot across the bow of Enbridge: If the company doesn't improve its performance, it won't win approval for the pipeline project that Mr. Harper and the Alberta-based oil industry see as an urgent priority. Backed by Ottawa, western crude producers are eager to expand their markets beyond the well-supplied U.S. in order to increase production and reduce the steep discount they're now fetching for their crude.

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While Mr. Harper fights a political fire in British Columbia, he faces the prospect of another battle in Quebec, where opposition is gearing up to Enbridge's plan to reverse the flow of an existing pipeline to bring western oil – including oil-sands crude – into Montreal. Premier Jean Charest's government has already signalled it expects to be involved in the environmental review of the Line 9 reversal. But the Liberal premier is battling for his political life and a victory by the Parti Québécois in the current election would further complicate the political challenge.

This week, Mr. Harper's senior minister from B.C., Heritage Minister James Moore, took the extraordinary step of dressing down Enbridge on a popular Vancouver radio show, chastising it for its high-profile pipeline spills in the U.S. and its poor communications in British Columbia. Mr. Moore warned the project "will not survive public scrutiny" unless Enbridge improves that performance.

Industry officials are watching Enbridge's problems – and Ottawa's reaction to them – with growing unease. There is a sense in the industry that Mr. Moore's outburst signalled that Ottawa is looking to distance itself from the Gateway project, a view that is denied by the Prime Minister's Office.

"Minister Moore was commenting on Enbridge writ large," PMO director of communication, Andrew MacDougall, said in an e-mail. "The government position is clear: It is in Canada's national interest to diversify markets for our exports, including the products of our natural resource sector. There is a process under way to determine whether the project in question is environmentally sound, and we will wait to see what the science says on the proposal" before making a decision.

Despite scathing reprimands in the past few weeks by American regulators over its safety practices, Enbridge continues to insist it has a stellar record.

"Over the last decade we've transported almost 12 billion barrels of crude oil with a safe delivery record better than 99.999 per cent," Enbridge president Al Monaco said in a release. "That's good, but for us, it's not good enough. We will never stop striving for 100 per cent."

Mr. Harper is expected to travel to British Columbia next week, and he will be under pressure to explain Mr. Moore's comment, and respond to Premier Christy Clark's threat to somehow block the pipeline unless several conditions are met, including a greater share of revenues for her province to compensate for the environmental risk.

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Opponents of the pipeline condemned the new deadline, though it reflects the review panel's current estimate of completion. If the panel judges it needs more time to weigh the many thousands of pages of submissions, it should get it, said Josh Paterson, a staff lawyer with West Coast Environmental Law Network. "We want to make the right decision and that doesn't mean making it according to some arbitrary deadline," he said.

Shawn McCarthy is an Ottawa-based, national business correspondent for The Globe and Mail, covering a global energy beat. He writes on various aspects of the international energy industry, from oil and gas production and refining, to the development of new technologies, to the business implications of climate-change regulations. More

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